Power bills up 8.5pc - and that's the good news

Adam Morton

VICTORIANS will pay 8.5 per cent more for their electricity as a result of the carbon price - less than estimated by the federal government - according to research billed as the most thorough investigation of Australia's climate change laws.

A study by the University of Queensland found Victorians faced a significant increase in household power bills from July 1 but a smaller hike than the 8.9 per cent average across the five eastern states linked through the National Electricity Market.

The projections come from ''massive hour-by-hour, real-time supercomputer modelling'' simulating behaviour of power generators, traders and consumers in the past three years and factoring in the carbon price of $23 per tonne of emissions. It suggested the national impact will be less than the 10 per cent increase estimated by Treasury.

It also challenged the Victorian government's claim that the state would be hardest hit due to its reliance on brown coal, finding Queensland (10.4 per cent) faced a higher initial price hike.

For an average Victorian household, the carbon price would be expected to boost the annual cost of electricity by about $125, or $2.40 a week. The federal government says two-thirds of households will be fully compensated and eight out of nine will get some help through income tax cuts and increased welfare payments.

New South Wales (8.7 per cent) and South Australia (8.6 per cent) are expected to face similar price rises to Victoria, while Tasmania - which runs predominantly on clean hydroelectricity - is expected to pay just 3.8 per cent more.

Advertisement

The modelling found Victoria faced a smaller rise than Queensland in part because its brown coal generators would absorb more of the carbon price than the black coal generators in northern states. Victorian power stations are expected to receive about 97 per cent of $5.5 billion compensation available to the energy sector.

John Foster, of the University of Queensland's Global Change Institute, said its carbon price modelling was the most thorough available.

You will now receive updates fromAM & PM Update Newsletter

AM & PM Update Newsletter

But he said price rises due to the carbon price may ultimately be less than projected given the ''incredible slack in the system'' - opportunities to limit the impact of the price through improving energy efficiency.

''I think people will start economising a lot more when the price comes in,'' Professor Foster said. ''There are an awful lot of economists around that are arguing that the increased costs are just going to be passed on and nobody's going to do anything about it. That's inconceivable … you would expect behaviour to change.''

Energy Retailers Association of Australia chief executive Cameron O'Reilly said the impact of the carbon price was extraordinarily complex and almost impossible to model with a high degree of confidence.

But he said on average Victorians were likely to be affected less than people in other states because they use less electricity and more natural gas, which has lower greenhouse emissions.

''It's difficult to be precise, but clearly, as this study indicates, there will be regional differences,'' Mr O'Reilly said.

The introduction of the carbon price follows a 40 per cent increase in electricity prices over the past five years.